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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
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Friday, April 22, 2022, 9:00 am ET
All hail Fearless Rick, chief writer, editor, and publisher of this blog, for yesterday's pre-market posting, Dow Theory, Fibonacci Levels Suggest Recent Rally Could End Suddenly.
He absolutely nailed it.
After the Dow opened some 326 points to the upside on Thursday, there was a brief hesitation before the industrial index and all the others began a tortuous journey into the maw of a grinding decline. The eventual 760-point descent amounted to just short of a two percent trip, top to bottom, close to where the major indices all closed for the day.
Commentary from Fed speakers suggesting 50 basis point rate hikes at the May, June, July and September meetings are being cited as rationale for the selloff, though Money Daily's technical analysis provides a more accurate, technically-founded perspective. The case for hiking rates was already well=-established. The idea that trotting out Fed Chairman Jerome Powell and San Francisco Fed President Mary Daly to reiterate what was already known to serious market participants somehow caused an abrupt turnabout for stocks - and treasuries - truly pushed the narrative envelope beyond belief.
What also was evident to just about anybody was the relentless drive off the lows of March 8 (March 14 for the NASDAQ) to interim highs set on or about March 29 and the inability of stocks to move beyond those levels in an economy that is stuttering under pressure from inflation, lack of government leadership, and growing public dissent.
The Fibonacci references from closing prices were accurate enough to presage Thursday's drop, as was the Dow Theory adjunct. Bear markets normally begin with sharp declines, as does resumption of such, which was what Thursday's trade exhibited in a bold manner.
Stocks being simply overextended offered a more concise, pedestrian view of current market conditions.
Carnage on the S&P, NYSE and NASDAQ was evident, the two percent drop on the NASDAQ sending the index back down near recent lows. Currently the NASDAQ has settled down 18 percent from its November 19 high of 16,057.44 and down 16.79% year-to-date. The S&P is down 8.40% on the year, while the Dow and NYSE Composite are less than five percent lower for 2022.
Treasury yields spiked, especially on the short end, as yield on 30-day bills shot up from 0.35 to 0.50 on the day. Yield on the 2-year note hit a three-year high at 2.73% before closing at 2.68%, flattening the curve, with 2s-30s separated by a mere 26 basis points (30-year yield: 2.94%). 5s-10s and 7s-10s inverted moreso, with 5s and 7s both at 2.96% and the 10-year note yielding 2.90%.
With six FOMC meetings remaining on the 2022 schedule and a rate hike expected at each of them, the bond market is suffering spasms of self-doubt and de-risking. Beyond treasuries, companies are scrambling to secure funding at the lowest cost available, the supply of which is shrinking rapidly. Mortgage rates continue to rise, now up for seven consecutive weeks. according to Freddie Mac, a 30-year fixed-rate mortgage averaged 5.11% in the week ending April 21, an 11-year high.
As the opening bell approaches in New York, international equities are in a sea of red. Beginning with the NIKKEI down 447 points (1.63%) and India's SENSEX off 714 (1.23%), losses are extending in Europe, with the DAX off 228 (-1.58%), and France's CAC-30 down 88 points (-1.31%).
With US equity futures mixed (Dow, S&P lower, NASDAQ higher) the week is shaping up for either a very volatile session Friday or one that reflects the market needing a rest after the high and low swings thus far. For the week, the Dow remains positive, up nearly one percent, with a gain of 341 points. The NASDAQ is the weakest of the bunch with a 176-point loss on the books (-1.32%). The S&P 500 is essentially flat, up by a mere one point from the April 14 close and the NYSE Composite is sporting 12-point loss.
WTI crude oil continues to waver just above $100/barrel, while Bitcoin reached a high above $42,800 Thursday only to drop it all, currently resting around $40,400. As is usually the case during broad stock selloffs, gold and silver were clubbed like baby seals and continue to be beaten down on the COMEX. Gold: $1939.60; silver: $24.27.
At the Close, Thursday, April 21, 2022:
Thursday, April 21, 2022, 7:52 am ET
Globalist traders don't follow any rules, so there's no reason to expect technical analysis to uncover any inconvenient truths. Stocks move in whatever ways the pre-programmed algorithms are directed. If news is interpreted as positive, stocks advance. Negative, declines.
Keeping the conspiracy theory system of trading firmly back of mind, let's focus on Dow Theory and Fibonacci retracements per the latest equity ramping which began on March 8.
On that day, the Dow Jones Industrial Average closed at its lowest level of the year, 32,632.64. Since then, the index has gained some 2528 points, closing Wednesday, April 20, at 35,160.79. That gain accounts for a 60.65% retracement from the January 3 high of 36,799.65.
The Fibonacci retracement levels are 23.6%, 38.2%, 61.8%, and 78.6%. While not officially a Fibonacci ratio, 50% is also used.
The Dow Jones Transportation Average, which also began zooming higher on March 8, didn't fare quite so well. Rocking off its bottom of 14,736.60, it reached a high of 16,718.54 on March 29, though those highs and lows are only part of the story for the transports. 14,470.72 was the bottom the transportation average dropped to on April 8, the fourth significant bottom since the all-time high on November 2nd of 17,039,38.
Thus, the Transportation Average fell 15.07% peak to trough - a decline of some 2568 points - and has since recovered 993 points, a 38.68% retracement, right in line with the second famous Fibonacci level.
Next, Dow Theory calls for a primary trend reversal in the Industrials to be confirmed by one in the transports. The primary trend on the Dow changed from bull to bear completely on March 29. The signs of a trend reversal were becoming obvious well before that, but when the Dow failed to reach the interim high from February 9 (35,768.06), the bear market was confirmed, and was further confirmed by the crash on the Transportation Average on April 8, making the confirmation by the transports just eight days after the Dow set the pattern.
With the Dow headed for the Fibonacci level of 61.8% possibly today (Thursday, April 21), chartists will take note of the bear trap set-up in place on both indices. Should the Dow fail at or near this level (roughly another 85 points from Wednesday's close), the retracement will have completed and another leg back down could be on the menu.
Due for a pullback after gaining nearly 1000 points over the past seven sessions are the Transports, from the 38.2% retracement level. It all comes together on Thursday, whether technical analysis and chart rendering will hold sway over the well-primed algos and the globalist investors who long for higher highs as opposed to lower lows.
This is being posted about two hours prior to the opening bell on Wall Street, where equity futures are soaring. Dow futures are ahead by 233 points, but plenty can happen before the big clang to open the cash session.
Regardless of Thursday's direction, likely to be led by earnings releases before the open from American Airlines (AAL), AT&T (T), and more than two dozen regional banking outfits both before the open and after the close.
Even with the VIX dipping below 20 on Wednesday, it's still in dangerous territory. Thursday, April 21 could turn out to be a watershed date for markets.
At the Close, Wednesday, April 20, 2022:
Wednesday, April 20, 2022, 9:40 am ET
For your consideration:
Bill Gates is the largest owner of farmland in America (he's also fond of faulty computer operating systems and vaccines)
BlackRock (Larry Fink, CEO) is the largest owner of residential property in the US.
Berkshire Hathaway (Warren Buffett, founder, CEO since 1970) owns substantial stakes in railroads and many other major public and private companies)
Vanguard Funds holds major positions in most of the Fortune 500 stocks (along with BlackRock, State Street Bank and Berkshire Hathaway)
The median sales price of existing homes in the USA is $357,300 (March, 2022)
Despite 8.5% annual inflation (CPI) in the US, gold, silver, and bitcoin prices are either lower year-to-date or stagnating. Food, gas, property taxes, prescription drugs, and just about everything else is higher.
The commonality of Warren Buffett, Larry Fink, and Bill Gates is that they are all billionaires, and Americans by nationality, but they are indeed globalists, beneficiaries of government largesse, higher stock prices, higher real estate prices, and general inflation.
Compared to them, most Americans are mere blips on the wealth screen. The wealthiest 1% of US residents -- about 3.29 million people -- hold 42.5% of the nation's wealth, and they're coming for the rest of it, it appears.
So, what are poor, middle-class and upper-middle class Americans doing to protect or grow their wealth?
Owning stocks and homes for the most part. But they're missing out on the best advantages of their real estate unless they're growing vegetables or grains, or grazing cattle or sheep, and renting out part of it.
Normally essential to a reasonable standard of living, a house (home) is mistakenly considered an asset, when, in fact - unless it's fully paid for - it's a liability. There's the mortgage, taxes, and upkeep to pay, so most people, while enjoying the privacy and comfort of a residential property, are actually not gaining in the global wealth game. That's why Gates buys farmland and BlackRock buys houses. Farmland produces food (and, in the case of corn, fuel, i.e., ethanol) and houses produce rent.
The regular Joe or Jane Sixpack don't get that part of the equation. Unless they start hedging soon by renting out part of their property (income) and starting a garden (food), they're going to fall even further behind the richest people in the country and the world.
It's not difficult to achieve both ends of the rent/food equation in a residential home. Rental income can be attained by starting a business that operates from the home and designating a percentage of the square footage to the business. Whether one makes or loses money in the business is somewhat less of a consideration, though it's always better to be making money rather than losing it. The kicker is that losses in a business - even when paying rent to yourself via your home - can result in tax benefits if structured properly. There are other tax considerations, such as the basis of your property value if you plan on selling, but paying yourself rent through your own business could help you keep up with the Jones's, the Gates, and the Finks.
Farming, or, in most residential situations, gardening, is not such a difficult task and can be quite rewarding in terms of your overall health, both physical and financial. Tomatoes at about $3.00 a pound can be easily reduced to less than 20¢ per pound by growing your own. It only takes about 10 square feet, some good soil, rain and sunshine to produce enough tomatoes - or just about any other vegetable - to substantially decrease what you buy from the local market. People with an excess of backyard space can grow more than enough lettuce, spinach, tomatoes, peppers, squash, eggplant, etc., to feed the whole family. The rest can be given or sold to neighbors. Food is as good as cash, always and everywhere (except in areas of high farming).
Those lucky enough to have space for chickens will also have eggs (the chickens come first, then the eggs), reducing their weekly grocery bill while providing nutrient rich food for their families.
Gardening costs can be tax deductions as well, but it's better to keep those costs as part of your plain old disposable income. Better to keep the tax collection agencies to other business than to how you feed yourself and your family.
Bottom line, owning stocks and real estate is not exactly the panacea you're seeking to ultimate wealth and prosperity. Owning stocks is nice, but it's a rigged system because stocks only go up, and when they do go down, rest assured the big guys are making money and you're not. Dividends and gains in stock prices are also subject to taxation, as is, well, everything.
And, while allocating as much as 30-40% of your investment portfolio into gold, silver, and bitcoin, setting up a home business and getting your hands dirty in a garden are certain ways to produce more tangible benefits.
At the Close, Tuesday, April 19, 2022:
Tuesday, April 19, 2022, 9:21 am ET
Assessment of Monday's wild, bouncy ride on US equity markets ranged from "theatre of the absurd" to "a pump, a dump, pump, dump, pump" as stocks gyrated across the unchanged line, though each separate index carried the same pattern throughout the session. Most alarming was the outrageous tape-painting into the close, wherein the S&P erased nearly all of its 20-point loss in the final eight minutes of trading.
The $SPX was not alone.
Dow Industrials were down 170 points with less than ten minutes remaining in the session, but closed down a mere 39.54. The NASDAQ was the party gaining 70 points in the final nine minutes.
Was this short covering by crafty day-trading insiders? Maybe. The most likely explanation is that it was the trading desk of the New York Fed or the President's Working Group (aka, Plunge Protection Team, or PPT) making certain that losses the day after a three-day break were not excessive. Wouldn't want to rile up the proles, you know.
Skepticism of anything and everything relating to economics these days (to say nothing of the narrowing of the political spectrum by mainstream media) has become something of a sport for investors, analysts, and even casual observers. Since the wreckage from the GFC of 2008-09 was never suitably resolved, US corporates have relied upon cheap money from the Fed and stock buybacks to dilute shares outstanding, boosting company EPS.
With due notice, most of that has come to an end, now that inflation is much more entrenched than the "transitory" fakery thrown at the public in the spring and summer of 2021. Heading into the summer of 2022, prices on essentials, particularly food and fuel, have soared to stocker shock levels.
Gas at the pump in many parts of the country is over $4.00 a gallon, while prices on everything from eggs to ground beef have seen dramatic gains, and they largely have nothing to do with Putin, as the White House apparatchiks would prefer you believe. Administration policies have been pointed directly at the heads of millions of consumers and the results are nothing short of dazzling. One could not have planned for worse outcomes than the US public has been subjected to under the imposter chief.
Despite the US and global economy teetering on the brink of disaster, it's about to get worse, thanks to COVID lockdowns in Shanghai, China, which has closed the world's busiest port for three weeks. There are literally hundreds of ships moored off the coast near Shanghai, either awaiting entry to unload (many containing food products, which may have already spoiled), or to pick up export containers full of products destined for America.
Though unconfirmed, officials in Shanghai suggest that the "Zero-Covid" restrictions on movement and transport may be lifted as soon as Wednesday. Should that occur, and Shanghai's port resume near-normal conditions, a supply chain disruption may be short-lived. However, manufacturing parts for autos, computers, TVs, cell phones, and other electronics have been shuttered up the line. US companies like Apple and Tesla are already bracing for weakened second quarter production and profit.
Will Americans suffer more price hikes in food, energy and their favorite toys in months to come? The current condition and ongoing efforts by the US federal government to undermine the economy suggests a worsening situation by mid-summer, if not sooner.
Stolen elections have consequences. So do corporate capture and a depreciating dollar.
At the Close, Monday, April 18, 2022:
Sunday, April 17, 2022, 11:17 am ET
US equites tumbled yet again over the week, with the Dow and NYSE Composite losing for a third consecutive week and the NASDAQ and S&P experiencing losses a second straight week, though the declines in the latter two were more severe, catching down to their more stable neighbors.
Highlighting the week was Elon Musk's thwarted attempt to purchase Twitter (TWTR) and take the company private, spearheaded by Saudis and woke anti-capitalists who prefer their social media slanted their way, regardless of facts. What's the world coming to when a billionaire can't have what he wants?
Twitter's board responded to Musk's generous offer with disdain, setting out a "poison pill" that would ostensibly prevent any hostile takeover attempts at the company by diluting shares of any entity owning more than 15% of the outstanding stock. For its part, Vanguard, the largest shareholder of record, purchased more shares while rejecting Musk's bid at $54 per share, well above Twitter's price of less than $40 per share prior to Musk's offer.
Disregarding its role as a fiduciary, Vanguard is arguing that the best interest of its investors is in maintaining the price of Twitter somewhere 25-40% below any buyout tender. Lawsuits, countersuits and counter-countersuits are likely to be all the rage soon.
The week, shortened by the traditional observance of Good Friday - which must be racist or somehow discriminatory, right? - also saw the kickoff of earnings season, with the nation's major banking institutions showing up with mixed results. JP Morgan Chase was the first and most negatively affected, sending the stock down from 134.72 to a low of 126.12 at Thursday's close. The nation's largest bank by market cap is down 22% on the year.
Two banks fairly removed from the retail business, Goldman Sachs (GS) and Morgan Stanley (MS) managed to beat estimates, though their first quarter reports for 2022 were mere shadows of the same period a year ago. Wells Fargo (WFC) and Citigroup (C) had their own woes, as Wells saw mortgage originations fall by a third from a year ago and Citi adding $1.9 billion to credit loss reserves. Both stocks slumped after their respective reports, leaving Wells down 8.63% on the year and Citi off 19.29% year-to-date.
Bank of America (BAC, -18.64 YTD) was reserved for a Monday (4/18) morning release, along with fellow swindlers, Synchrony Financial (SYF, -19.78 YTD) and BNY Mellon (BK, -19.18 YTD).
Overall, the financial sector is looking quite sickly, the publicity press touting everything from inflation to Russia to lack of mergers and acquisitions for poor performances. Matter of factly, while Goldman Sachs and Morgan Stanley have been slowed by the downturn in deal-making, retailers, such as Citi, JP Morgan and Bank of America face coming credit card defaults as recovery from two years of lockdowns and covid-related closures and restrictions peters out. Wages in America are failing to keep up with rising prices and families are falling behind.
The coming week features first quarter earnings releases from some of the minor players, including Truist (TFC), Regions (RF), First Horizon (FHN), Huntington (HBAN), and Bank of the Ozarks (OZK). Overall, a big week for earnings is queued up, as some major names release from the 18th through the 22nd, including Johnson & Johnson (JNJ), Netflix (NFLX), Travelers (TRV), IBM (IBM, Proctor & Gamble (PG), Telsa (TSLA), United Airlines, American Air Lines (AAL), AT&T (T), American Express (AXP), and Verizon (VZ), to name just a few.
Treasuries were absolutely blown out across the board with 30-day yields headed towards the upper range of the federal funds rate (0.25-0.50%) at 0.37% on Thursday, a massive 85% rise from just a week ago. While the 10-year note yield rose 11 basis points to a stunning 2.83%, most shocking was the move by the 20-year bond, spiking from 2.94% to 3.09%, a full 15 basis points and the highest rate on any bond since the 30-year topped out at 3.13% in March, 2019.
Funding costs are rising fast, putting a temporary hold on everything from car loans to stock buybacks. Upward pressure on interest rats is likely to be incessant over the next six to 12 months and possibly for an even longer period, dependent on how aggressively the Fed wants to tackle inflation. Unequivocally behind the "curve" when it comes to slowing inflation, the Fed's plans for rate hikes at every meeting through at least the end of 2022 would likely send the benchmark 10-year note well beyond five percent, and, depending on the size of the hikes, possibly as high as seven percent.
Rumors abound that the Fed will hit the rate button with a half-percent (0.50%) rise in May and again at the June meeting. Should they continue along that route, rates will be out the door and into the next county by the end of summer. A one-two punch that would put 1 month bills somewhere over one percent may prove to put enough of a scare into markets at the Fed could raise at a more moderate pace of 0.25% per meeting. As consumer inflation continues to run hot (8.5%, per the March CPI), the Fed must consider slamming the brakes on inflation rather than easing the economy down without risking a recession.
Lowered rates and massive QE during the pandemic period from 2020 through the end of last year may turn out to be just the tonic needed by the Fed to avoid the embarrassment of negative rates had the economy truly tanked. By inducing inflation, the Fed gives itself carte blanche to raise with abandon, thus allowing more room for cuts after the economy has cooled off, crashed, or otherwise retreated. Jay Powell, 3D chess master? Maybe.
It was a solid week for oil producers, as WTI crude kicked higher, rising from 94.29 on 4/11 to $106.95 on Thursday, 4/14, marking the highest price for crude this month. Gas prices have stabilized around a US national average price of $4.08 per gallon for unleaded regular, down about two cents from the prior week and 21 cents from a month ago. However, current prices are a far cry from a year-ago, when the national average was a more reasonable $2.87.
Efforts to keep the price of fuel at the pump from reaching catastrophic levels will continue in earnest, though there seems to be a lack of real commitment by the lazy US congress, which is more interested in mid-term elections and LGBQT matters than actually helping American families. While the oil and gas situation is hardly out of hand - in reality, there's always been and will continue to be plenty of supply - it's an annoyance and heavy cost to drivers and is adding to the inflationary environment, as shipping and transportation costs have blown up.
The patience of hodlers and relentless fear-mongering by politicians and regulatory agencies is keeping bitcoin in a range mostly between $40,000 and $47,000 (currently hovering around $40,500), spending much of the time at or near the lower end. Since the inception of various ETFs tracking bitcoin, price for the reserve cryptocurrency has been stunted in much the same manner as gold and silver pricing is managed and mangled by the COMEX and LBMA.
Over the past six months, bitcoin has traded in concert with the NASDAQ, being treated as some wildly speculative tech stock with a P/E of 150, rather than its rightful role as a reasonable alternative store of value as the US dollar, yen, euro, and pound sink. Measured against competing currencies outside of bitcoin, the dollar has risen of late, as other countries are coerced to follw America's lead, keeping the pattern of bitcoin - down more than 40% from its all-time high in November of 2021 - much the same against any other currency.
It's going to take full-blown currency collapse to render bitcoin higher. It has ceased to be an investment, becoming more of an irritation to fiat central banking authorities who seek its demise. There's a good possibility that as the Fed hikes rates throughout 2022, smacking down the NASDAQ and the rest of the market, that bitcoin could fall further. $32,000 appears to offer quite considerable support and any approach towards that level may spur vigorous buying by the general public and whales alike... which is why it's not likely to go there.
Despite the doom porn and ridiculous arguments against bitcoin, it continues to play a role in the evolving global economic theater, and may prove to be something of an adjunct to gold, silver and other hard assets. Whether it reaches lofty predictions of $100,000 or even $1 million, as some have suggested, depends largely on the fate of nations and their stubbornness to keep the fiat regime in place.
China, Russia, the rest of the BRIIC nations (Brazil, India, Indonesia), and the rest of the world - particularly Africa and South America - are fueling massive bitcoin adoption. Should bitcoin ever gain prominence as a trustworthy medium of exchange, a la online retailing, its value could skyrocket. No matter which way the world economy turns, bitcoin seems entrenched within it and may someday prove a vital, indisputable, unassailable currency, free from restrictions imposed by an elite class of government and big business interests.
There continues to be hope.
Gold price 04/03: $1,928.50
Silver price 04/03: $24.76
Bullion prices spkied nicely over the course of the week as the figures above exhibit. Gold reached a high of $1985, it's best showing in over a month, while silver breifly popped over $26 an ounce, also the best in just over a month's time. Near-term, one-month bottoms (gold, $1909; silver, $24.45) suggest a resumption of bull markets in both precious metals, understanding that commodities in general (zinc, wheat, copper, oil) have been ripping higher for months.
As interest rates climb, arguments against precious metals and hard assets in general will abound since gold, silver and bitcoin don't pay interest nor dividends. The counterargument is that these assets (or money, if you will) carry no counter-party risk, since they aren't backed by any government claims of full faith and credit, of which there is little supply of either. At elevated prices, supply is beginning to exhibit some strain, though not nearly as severe as the early pandemic days, when online dealers were backlogged for weeks to months. Similar to the case for bitcoin, it's hard to see investments in gold and silver going seriously sour.
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
The Single Ounce Silver Market Price Benchmark (SOSMPB) rose significantly over the course of the week, to $40.99, a gain of $1.22 from the April 10 price of $39.77. The price fell below $40.00 for the first time in four weeks.
Looking ahead, the week starting with the 18th of April will be dominated by first quarter earnings reports (and some celebration for 4/20), the continuing sanctioning masquerade, Russia talk, and climate change surrounding Friday's Earth Day, along with somewhat truncated options expiry, setting up what appears to be a week of considerable volatility.
At the Close, Thursday, April 14, 2022:
For the Week:
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